Saturday, March 23, 2013

NEW HAMPSHIRE AUTOMOBILE DIMINISHED VALUE - AN APPRAISAL OF THE SITUATION

CONCORD, New Hampshire - In the State of New Hampshire, you are entitled to recover the value that your vehicle has lost as a result of collision repairs from the insurance company of the at-fault driver.

Automobile Diminished Value has officially become an entry in the lexicon of insurance terminology. This article explains what is known as “inherent diminished value.” It reflects a car’s quantifiable loss in fair market value subsequent to being repaired after a collision.

Differing from “repair related diminished value” which deals with faulty repairs and “insurance-related diminished value,” which deals with an insurer’s use of aftermarket parts in car repairs, “inherent diminished value” claims are far more common.

It has always been known that used-car buyers favor purchasing a previously undamaged car to a repaired one. But until CARFAX came along it was virtually impossible to know one from the other. Now that repaired vehicles can be easily identified by having the dealer order a CARFAX report, these cars and the stigma of their being previously repaired eroded their trade-in values, sometimes considerably. This type of loss is known as “inherent diminished value.”

In 1984 CARFAX was founded in Columbia, Missouri by a computer expert named Ewin Barnett III working with Robert Daniel Clark, an accountant from Huntingdon, PA. Barnett was initially trying to combat odometer fraud. By working closely with the Missouri Automobile Dealers Association, in 1986 he offered the early version CARFAX vehicle history report to the dealer market. These reports were developed with a database of just 10,000 records and were distributed via fax machine. By the end of 1993, CARFAX obtained title information from nearly all fifty states. In December 1996, the company's website was launched to offer consumers the same vehicle history reports already available to businesses. [1]

Different states have reached different conclusions concerning diminished value. Supreme Court decisions [2]throughout the United States have provided for recovery for diminution in value of a damaged vehicle in third-party claims only ( Except GA, KS and WA where you can collect from your own insurer.) In layman’s terms it simply means that you can’t make a diminished value claim against your own insurer unless the at-fault driver was uninsured. If the damages to your car were the fault of someone else, their insurance company is liable for payment of your diminished value loss.

In Siegle v. Progressive Consumers Ins. Co., Carole M. Seigle’s car was repaired after a collision. The insurer of the at-fault driver, Progressive Insurance Company, paid to have the vehicle repaired. However, after the repairs were completed, Siegle discovered that her automobile had sustained what she characterizes as inherent diminished value, in the amount of $2,677.19.Siegle submitted this additional diminished value claim to Progressive, but Progressive declined to pay it.

Citing McHale v. Farm Bureau Mutual Insurance Co.[3]and other opinions, in 2002 Florida’s Supreme Court heard Siegle v. Progressive and determined as follows: “Although an insurer is not obligated to pay for the “diminished value” of a properly repaired vehicle in response to a first party claim, the owner of a vehicle may seek damages in tort for lost value from a tortfeasor who has caused damage to the vehicle.” In short, Florida’s insurance consumers may seek compensation for their vehicle’s loss in fair market value from the adverse insurance company. This is also true in New Hampshire.

The Florida Department of Insurance addressed the issue of aninsurance company’s liability for payment of diminished value in a document that clarifies Florida law. Informational Bulletin 84-270 which reads in pertinent part: “The responsibility of the insurance company for automobile accident damages is the substantial restoration of the automobile as to function, appearance, and value. The owner has not been properly indemnified unless there is no diminution in value of the automobile as it was before the damage and as it is after repairs.” To summarize the bulletin, in Florida, insurance companies are expected to indemnify automobile owners for the value of their vehicles prior to the loss.

How much of a vehicle’s value is ultimately lost after repairs are completed? The amount of diminished value varies according to many factors. The year, make, model, mileage, type and severity of prior damage and even a car’s color can factor in to the equation. Consumers of high-end cars such as Bentley, Mercedes-Benz and Porsche tend to be more discriminating and usually won't buy a vehicle that was repaired, regardless of how minor. Diminished Value can result in 50% of the vehicle's value lost.

How is diminished value calculated? In order to determine the most equitable settlement amount, the ultimate authority is the used car market itself. Insurance companies began using a formula known as Rule 17C which was modeled after a formula once used by Infinity Insurance Company. This formula contained “modifiers” such as severity of damage and mileage, and then assigned points accordingly. The total number of points accumulated equaled the amount of diminished value.

In 2001, the Georgia Supreme Court made an historic ruling in the case of State Farm Insurance Company v. Mabry.[4] Their decision impacted how automobile diminished value claims should be treated, not only in Georgia, but also in California and most other states. The diminution of value after a collision has always existed but, until Mabry, insurance companies refused to pay or even acknowledge diminished value.

The Georgia Insurance Commissioner issued a directive regarding the Georgia Supreme Court ruling that set precedent for diminished value claims. What this clarification meant for consumers was that their insurer would have to settle each claim on an individual basis, because no single formula could be applied to all diminished value claims. The Commissioner concluded that the Georgia 17-C formula is to be used only in the event there is no other methodology to arrive at the diminished value and that it is not sanctioned or endorsed by the Georgia Department of Insurance. The trial court's order required State Farm to include an evaluation of diminution in value in its standard assessment of damages, just as it evaluates other elements of damage, and to adopt a suitable methodology for doing so.

Many companies that provide automobile diminished value appraisals use this methodology. Other companies rely on automobile auction results which show the difference in prices realized between previously repaired vs. previously unrepaired vehicles. These reports are not specific to the actual vehicle in question nor do they address the specific repairs that were done.

Only one indicator can be considered relevant regarding automobile diminished value - how much less the dealer will offer for your trade-in as a result of a bad CARFAX report. If a consumer or attorney needs to hire a diminished value appraiser, the appraisal should preferably be done on the basis of actual dealer opinions rather than the use of formulas or auction results. It is advisable to make certain that the appraiser is properly licensed in Florida as an independent adjuster and can be available for any legal proceedings that might follow.

Diminished value appraisal figures should represent what the vehicle will encounter in the real world of used cars. It is the used car managers at dealerships who provide the most realistic assessment of values because automobile dealers are the ones purchasing and re-selling the vehicles. An automobile diminished value appraisal that is compiled in this manner, listing each dealer, their estimation of how much less they would pay because of the bad CARFAX and any pertinent comments such as how different variables may have affected their decisions, carries the most weight. Although it is more time consuming than using a formulaic approach, it is a valid method by which accuracy can be obtained.

Although most states including New Hampshire have not accepted the existence of diminished value only in first-party claims, drivers who crash their own vehicles still have recourse by taking a tax-deduction for the diminished value of their automobiles.[5]IRS Form 4684 is used for casualty losses such as automobile diminished value. It is advisable to check with an accountant or CPA to determine exactly what percentage of the appraised amount is tax-deductible. The cost of the automobile diminished value appraisal is also tax-deductible on Line 22 of IRS Schedule A.

The fee for an Automobile Diminished Value
Report is $275.00. You may also make your Credit Card Payment by telephone,
call 772-359-4300. Credit card payments can be made on the PayPal page. Click on "Don't have a PayPal account?" to be taken to the secure credit card payment page.

After making your secure payment please email
the body shop estimate or insurance company appraisal to contact@stlucieappraisal.net or
FAX to 772-466-8400.